Saturday, August 23, 2008

Early economic theory dealt with exponential rates of growth. At the time of Britain’s colonial war in America, Richard Price contrasted the growth rates of savings at compound and simple interest. In 1798, Thomas Malthus applied this comparison to contrast ‘geometric’ rates of population growth to an (allegedly) only ‘arithmetic’ growth in its food supply. The basic model for financial crises was that of debt trends rising exponentially until they reached a limit beyond which debt-service obligations could not be met. At this point credit was destroyed and the economic system was brought down with a crash.By contrast, modern theory assumes that automatic stabilizers will return economies to a state of equilibrium if and when they are disturbed.

Such theories assume negative feedback (diminishing returns or diminishing marginal utility), not positive feedback such as exponential debt growth or increasing returns. Ancient economic thought focused on the debt problem, that is, the tendency of debts to grow exponentially, exceeding the economy’s ability to pay (and to produce). Modern economics assumes that money is only ‘a veil’, not intervening in economic processes as such. Concentrating on the ‘real’ tangible economy (depicted as operating without debt distortions or related debt overhead), modern economics banishes the debt problem to the realm of ‘externalities’. Culture is another economic ‘externality’ that is ignored. A century ago, optimists imagined that by increasing productivity, industrial capitalism would provide more leisure time, and hence would usher in higher cultural horizons. But by opposing a role for government and using the public debt as a lever to privatize hitherto public services – including public TV and radio broadcasting, national film boards, arts and other cultural programs – finance capitalism has tended to commercialize culture by downgrading it to the most common (lowest) but also most profitable common denominator.

Ancient economic thought also viewed wealth and income as addictive. It coped with the threat that wealth tended to lead to abusive hubristic behavior on the part of the rich. A designated role of religious and social values was to counter this human tendency toward addictive selfishness. But modern economic theory is based on a view of human nature that unrealistically assumes diminishing marginal utility for each successive unit of wealth. The problem of wealth addiction – and hence, drives for personal power – is not recognized, nor are problems of consumer addiction. The new business mentality is different from that of traditional societies. Most tribal communities seek to socialize their members not to be hubristic. But today’s wealth is egoistic in ways that injure others, lacking a contextual self-steering mechanism. The personal characteristics required for success under finance capitalism are associated with a stripping away of anything not directly associated with a ‘bottom line’ mentality. Expensive or ‘high’ culture (such as opera, symphony orchestras) is likely to suffer financial strangulation. To the extent that the new decadence emphasizes surface effects, the character of motion pictures is likely to shift away from plot-intensive movies about character (and how it deals with the hubristic temptations of wealth and success) to sensational effects. In a sense, one could say that culture becomes ‘proletarianized’.

In the 1830s the British economist William Nassau Senior began his class in political economy at Cambridge by announcing, ‘I am not here to talk about how to make you happy, but about how to make you rich’. The way to get rich is very simple. All you need is greed, and that is something that can’t be taught. It requires a deprivation of culture and what many societies believe is the social sensitivity that makes us human.New well-paid graduates are obliged to work between 80 and 120 hours a week. This is how corporations weed out new prospective employees. It was much the same for bankers, accountants and lawyers in the 1960s. The objective was to weed out any new recruits that had a personal life, family, hobbies, intellectual or cultural interests, or anything that might take precedence over the corporate life. Their entire personal horizon was supposed to consist of working in a dedicated way for their employer. Not everyone wanted to go through this weeding-out process. Bankers used to joke that the best foreign currency traders, for instance, had to come either from the Brooklyn or Hong Kong slums – someone from a poor household, without gentlemanly culture, often from an immigrant family, whose sole personal horizon was to make as much money as possible.

In this sense today’s rentier culture is dehumanizing. As the leadership of corporations has passed from what Thorstein Veblen called the ‘engineers’ to the financial managers, the objective is not to produce more or expand market share, but to increase the price of stocks, other securities and real estate. If executives find their self interest in ‘working for the stockholders’, it is largely be-cause they take more of their remuneration in the form of stock options than in salaries. They use corporate revenue not to fund new direct investment but to buy up their own stock to support its price. They also cut back on low-profit activities so as to increase earnings, and hence to increase the per-share price.The resulting ‘culture of greed’ has become anti-technological in seeking short-term payoffs. Corporate managers are rotated from one department to another, running them as autonomous profit-centers, regardless of the company’s overall long-term position. One sees in these new managers – Russia’s ‘7 bank barons’ as well as US corporate managers – an adolescent immaturity, a childish, self-centered, narcissistic lifestyle. They tend to view life as a game, which one ‘wins’ by accumulating more toys/money than one’s rivals.